Firstup Revenue, Valuation & Funding (2024)

jimmy sort of lost company to cox for about 350 million bucks had only about 30 million bucks raised in that company so a great big financial win for everybody him and his business partner who are great friends they've been doing it for many many years then figure out how to spin this new company out of cox which really helps internal communications across mega employees and big employee teams they have a about 20 of the global 200 using their platform with contract values you know on the low end in the hundreds of grands and all the way up to millions of dollars per year depending on the size and the growth of the team they raise 68 million bucks team of 200 based out there in san francisco g this is the top where i interview entrepreneurs who are number one are number two in their industry in terms of revenue or customer base you'll learn how much revenue they're making what their marketing funnel looks like and how many customers they have i'm now at twenty thousand dollars per top five and six million he has helped on global domination we just broke our 100 000 soul mark and i'm your host nathan latka this episode 761 coming up tomorrow morning we went from james smith over 4 000 developers paid him to catch bugs and he's raised 9.5 million dollars how do you break into that space hello everyone my guest today is jim larrison he's the co-founder and president of a company called dynamic signal the leading customer and employee advocacy and engagement platform jim has been involved in a handful of startups that were successful from within big companies to pure venture funded businesses with a couple of sold businesses and an ipo he's excited for what's to come with dynamic signal which has already raised over 68 million dollars in funding jim are you ready to take us to the top sure we were joking it sounds like something you're like relaxing in a bubble bath right now with with some female artists blasting over the the stereo yeah it's beautiful music in the background all right tell us about dynamic signal what's the company doing what's your business model how do you make money uh sure so we founded the company about seven years ago with really with the mission to how uh sort of revolutionary how to communicate with your employees so you know as you know big companies struggle to communicate with employees especially people out in the field you have retail employees you have people in factories and reaching those employees is very difficult especially since a lot of them don't actually have email so what we've what our focus is is really making a simple way to reach employees with the right content at the right time and so the main problem that companies deal with that we're trying to solve is you have low engagement employees and on corporate internet people don't use the internet many times the attention spans are really low the contents out of date are not timely you look at companies that potentially are trying to reach employees through sending newsletters to their home uh or magazines to their home or posters who does seriously people do that every every large company that has employees remote will print four color glossy newsletters and mail them to their home gosh that's brutal okay well here's look the other side is people are going to go nathan this is slack slack has solved this problem how did you respond to that yeah so we actually work well with slack so slack is more of a collaboration tool it's a tool where people can employees come to communicate with each other and collaborate with each other this is more a top-down communication tool it allows companies to push content or news to employees and it's really targeted to speak to the employee about the company and something that they might be interested in versus an employee talking directly to uh the ceo you know i feel like jeff bezos obviously doesn't want a hundred thousand employees reaching out to him directly yep makes good sense and what's the business model is it sas yeah it's a sas model uh so monthly subscription based okay and give us a sense just a generic sense um you know are people pay i mean is this more of a small business tool or an enterprise tool what's the average kind of company paying you per month yeah so we have three segments we go after so we have a global business that really focuses on the global 50 right so we have a lot of customers like mcdonald's and ge as our customers those are very very large customers that pay us up to hundreds of thousands of dollars per month and then we have an enterprise business that focuses on the global 1000. yeah those range in the 10 000 plus range for uh per month and then we have a corporate business that has people companies that have five thousand or less employees those typically range in the five to ten k per month okay got it and is the main factor that's driving these increases or decreasing contract value for you just number of seats based off number of employees yeah so a lot of times we'll our business model is to charge per employee group or number of employees we might have a corporate license if you're a smaller business where you just pay a fixed fee okay but it's because it's by employee the values by employees so that pricing is tied to employees and and dues a lot of times when i talk to ceos especially ones that are getting close to like 100 million run rate they'll have these cohorts built out and there are very different playbooks depending on the cohort and the acv on each of those cohorts a lot of them also that you they followed the nicely followed pattern kind of the 80 20 rule where for your case it'd be your global 50 make up more than 80 of your revenue but are less than 20 of your customers in terms of logo count is that is that the case with your business as well yeah probably i mean it's probably more of 70 30 versus 80 20. but yeah it's it's trending that way uh the big customers continue to grow and every quarter every year they're growing uh at sort of massive rates uh whereas the smaller customers have a tendency to sort of stay at the rate they're at when they start and when you say global 50 global 1000 like how do you determine those is that public does some big publication put those out or how are you measuring that um so we look at the number of employees so it's probably a generic term that we're using but we really look at we segment our customers based like on how many employees they have and then also segment them further based on where the you know how many employees they might have that are remote how many employees they have in factories how many employees they have that might be in a retail outlet uh and that helps us sort of guide what is is this a large business that our global team goes after for example nestle is a very large customer of ours nestle has hundreds of companies under the nestle brand and in each one of those they have divisions and subdivisions within the organization that makes this a very complicated problem to solve and so that's a global customer for us and that that cohort will pay anywhere between a hundred grand up to a million per month depending on the service they can pay you know there's no cap on it but uh for you right yeah exactly so your global let me break these cohorts down in terms of uh number of uh employees usually for each so global 50 how many employees typically uh you know that's a great question actually so global 50 probably would be some company that has 25 000 to millions of employees you know mcdonald's has close to three million employees okay and global global 1 000. yeah so global 1000 would be 5 000 to 25 000 and then five thousand less is the corporate okay makes good sense all right let's let's take our heads out of the sorry i took us in the weeds there for a second that's right take it back to the founding story so what year did you launch the company in uh let's see it was 2010. so we actually sold our pass company to cox enterprises uh me and my co-founders have worked together for about 20 years uh in a bunch of different companies and we sold addify was our past company we sold it to cox um what was the sale price it was about 350 million dollars okay is it bootstraps uh no we raised money we we were about three years into the business and sold it so it was a pretty quick exit uh but we had raised i think about 20 to 30 million dollars something around there sounds like though it was still a great return for everybody oh yeah it was great yeah and so while we were in cox we actually came up with this business model uh and the original idea actually is interesting it was to go after advocates and influencers and find a way to systematize the relationships that you have with those and so we worked with companies like general mills where they had bloggers in the cooking category and they would tap them to share recipes and talk about general most products what we saw though was that in companies like that and like oakley and nike the biggest advocates were their employees right and it was massive like the the engagement on these programs was off the map plus you can kind of force an employee to share an article about their own company right if it comes to the boss you're going yeah i guess that's true also but um they like to share it and we we have a whole gamification engine so there's points and leaderboards and all that good stuff so employees liked to share and talk about their company but they like the benefit of getting recognized also uh so let me assume let me ask you a question because your biggest thing is you already have a financial i'm assuming if any assumptions are wrong correct me you're set for life because you had your first exit right and it was a big number right so you're basically financially free you can do anything you want why do you ch why do you think somebody like an elon musk chooses to go build rockets and somebody like you chooses to go do kind of internal kind of hr software in other words why don't you go after a much bigger risk or a bigger challenge why do you think that is um you know that's a good question i think my first reason is and my co-founder russ talks about this a lot he's our ceo we work together for a long time the reason that we do this together is we like working together yeah right and he talks a lot because he's had a lot of success also and he talks about if you want to get rich go work on wall street right i mean that's where you can get rich if you want to get rich starting a company that's a complicated and difficult thing to do not everyone sells their company for 350 million dollars right right so we're doing it because we don't like working with basically we want to work with people that we enjoy working with and we just enjoy working in the weeds and doing technically complicated things when we started the company the three of us got in a room together we basically said when we build this company we don't want to we want to build the technology the right way which is why we've raised so much money we don't want to build it on the backs of our customers and so that's why we lead the category that's why we're powering all the big companies because we've invested so much in the technology which we enjoy doing and where so you've raised a total of you said 68 million yeah and where are you today in terms of team size uh we have about 200 a little bit over 200 employees most of them in our san francisco office okay and then we have people obviously out in the field and break break that down just between like how many sales people were engineers in that 200 um probably let's see about 80 engineers as my guests are technical folks okay uh and then sales marketing hr all the others falls into we probably have let's see about 40 sales people okay at this point i'm going to ask you an embarrassing question now go back to your go back to your first year in business do you remember how low your first year revenue was what was it oh uh oh my god i mean it actually probably wasn't that bad because when we spun the business out we had sold a couple deals you know as a part of spinning the business out so it's a couple million bucks probably the first year so this is this is i'm glad i asked this question because you just revealed something right like this is a strategy that works for a lot of people you're internal to a business especially founders trying to get their urn out like and they're like five years left in this damn earn out how do i get out of this but still make money oh let me spin a piece of technology out and take a few customers with me that's basically what you did is that right yeah and actually the amazing thing was this was a an evolution of what we had done at adify which was an ad tech business and when we sold at when we were selling attified to customers customers would these were media companies so they would struggle with we had set up fees that were in the 10 to 20k range and they would just go nuts about that too much money and then we sold it to general mills at 10 to 20 times that and they didn't blink an eye yep so we knew we were going down the right path as far as what business to go after and then fast forward that was in 2010 again obviously i want to give a specific number but in 2016 i mean what have you broken the magical 50 million dollar ar mark or 100 million dollar mark um obviously i can't talk too much detail we're probably close i mean we're close to that number but 150 you know you could probably close to the 50 you could probably sort of back into the numbers based on what i said in this in this day and age what do you because i get different feedback from different founders what do you have to be in terms of ar in your opinion to go public if that's something you've done any research on uh you know we talk about it a little bit i mean our vision obviously is go public my what you always hear sort of rule of thumb is you have to be on that track to be at 100 but you know every business is different based on how many customers you have or how much uses or engagement you have you know what's your churn look like those kinds of things obviously take into account yeah where are you at today in terms of total customers you're surveying um my guess up the top of my head is we're close to a couple thousand okay um but that includes the corporate business which is you know much bigger from the customer number obviously with the global 50 there's only 50 right there's only 50 potential there but a lot of revenue and same with global thousands right huge yeah yeah i think we put out an uh release earlier this year that said we had 20 of the global 200 or something like that i was just going to ask you that so of the global 50 do you do you have 100 percent you had to have the global 1 000. okay so 20 of global 200 probably close to that 20 is the gas got it that's great so a lot of lots of expansion you know you could sell 5x expansion opportunity there and that's assuming you don't figure out additional waste drive expansion arpu yeah what about i mean do you have any weird costs or do you see a gross margin that's typical of most sas companies you know in the mid 80 range yeah we don't have any weird costs at all our all our costs are driven into the technology itself that's it okay so are you in like call of 85 86 percentage range gross marginalized around there and then what are you you give us a great tactic in terms of kind of a weird way you grew early which was spin it out right did you have to broker any weird complex deal like did you take tech out of that company or were you just saying hey will you please let me and my you know my buddy out of the out of so we can start this new company you know the cox people really we had a great relationship with them their privately held company the great leadership there and initially we decided to build this within cox okay and uh and actually yeah they started funding it you know ran a piano i ran the p l we ran the business as a division of cox and quickly realized that they knew probably going in that they just didn't have the appetite to run a sort of quote-unquote startup business difficult for them to even they're an operator right that that's what they're good at so innovation and and sort of sort of forecasting potential revenue three years out isn't something that they want they want to know what their revenue is tomorrow so um so it was a it was a good way to sort of for them to get their feet wet in the space and understand what th what the trouble would be if they really owned this thing and they realized they didn't want to do that right so the exit i'm sure you went above and beyond to make sure they felt it was going to be a lot of trouble it was very troublesome for them but um so we uh you know we they got us a small piece of the company they invested some money in the you know initial round when we say small like less than five percent yeah it was a very small percent and then they they they put some money in too so that's great last few questions here on economics so you you you really understand kind of cohorts you're going after um do you see i mean when you look at logo churn for a company like what you're doing i mean do you see any meaningful logo churn annually no i mean that's that's something that's really amazing in our business has been that we are we i can't think of any customer we've had churn that's launched their program because you know our sales cycles are very long how long very very um you know i think the average i saw the other day was close to 200 something days 240 something like that um but we've had some that were a couple years of trying to get the deal done and a lot of that has to do with these the decision they're making is the decision they know is a long decision it's not something you can test right this is just going to touch every employee yeah and so if you push this out to every employee gee that ge pushed this out to hundreds of thousands of employees that have it on their phone it's not something you're going to pull back especially if employees like using it so you've had zero percent you can't think of anyone that started paying you launched the program and stopped we have none that i can think of maybe in our corporate business we might but in our sort of enterprise business we've never had a customer that's actually launched the program and then sort of shut it down and walked away now i'm probably jinxing myself by saying that no no no no no let me ask you a question you that probably gets you much more excited so that was logo churn i imagine you guys have definitely figured out the playbook of how to drive expansion revenue so somebody i'm making these numbers up somebody that pays you a million bucks per year what do you grow that to in year two is it one four one eight one two you know we're still trying to figure out how to make it work at the way that we've had success in getting these deals done up front um we've tried different things we've tried sort of the seat bucket license where as you grow you pay more and sort of that's the organic growth that doesn't seem to be as work as well as what we've recently found which is more pricing based on division or usage like so if you have a number of divisions that start using the program versus employees you pay more and there's more value to the customer to pay more in that point versus like now i have a new employee coming on and now i i go up in the next tier so that employee's effectively costing me another 5 000 a month so we're trying to get away from that so it's really the way we drive growth is a hundred percent based on getting more usage and that's it so our customer success team that's what they focus on is making sure engagement's high and usage is high your revenue growth month month over month what portion is from expansion revenue versus new customer revenue uh i don't know the number actually okay one other question here uh before we get to the wrap up paid spend per month i mean are you guys spent i mean are you are you doing things like conferences paid ad words things like that and if so give me a range about how much you spend per month um yeah we do all that stuff i mean we we we're spending after this last raise the focus really on that was international expansion uh expansion of marketing and growing our sort of sdr team uh and that's where we spend most of our money probably is really in the in that side of the things with demand gen tied to it um yeah it's probably it's a little bit less than that but it's a it's a significant investment all right last question here what do you like to get in terms of payback period uh well you know what we'd like to get is uh you know maybe 18 months yeah so something less than that yeah but my guess is we're closer to a couple years than that many of you listening right now don't have time to listen to every b2b sas ceo that i've interviewed if you want to get access to the database i've created with the year where your growth rates customer accounts margins and many many other data metrics and data points you can go to g-e-t l-a-t-k-a dot com here's the thing though this database i keep it to myself it's so freaking valuable and to preserve the quality of the data and make sure that the people that have access to it have a true advantage i'm only letting 10 companies on each month so we're full this month we can go to getlatkin.com to get on the waiting list for next month and look there's big people on the waiting list i mean the biggest vcs you've ever heard of you've probably heard of them they're big private equity billions and billions under management so it's an impressive waiting list go get on now at getlatka.com one of the themes guys i have on the show is i have very successful people at selling information on people like amy porterfield uh people that have online membership courses and many of you will direct message me and email me and some of you even text me and said nathan how do we do all this how do we do the email marketing for a course how do we handle the payment how do we put the membership login on our website you know how do we get the course information organized quickly and easily well the tool that people are using and a lot of people are using this you can see at nathanlacka dot com forward slash course that's forward slash course the trial is nice and free which i love if you're like me i just want to log in tinker around figure it out myself and then decide if i want to use it or not so it's nathanica.com forward slash course this is the most straightforward way i've seen to launch your course so you don't have to go buy 10 different pieces of software like email marketing plus payment plus a bunch of other stuff it's all in one the trial is totally free nathan lockett.com forward slash course go there now i'll see you there yeah good stuff let's wrap up here jim with the famous five number one what's your favorite business book uh um that's a good question i guess my favorite actual business book is the business adventures uh book which is actually bill gates favorite book business book also though i also suggest people read into thin air which is an amazing book it's not necessarily business book but great book number two is there a ceo you're following or studying um tony shea from zappos is a great great guy to follow great book also number delivery happiness you mean yeah yep number three uh is their favorite online tool you have like a cutie scheduling um there's a tool called owler which is like a company database it's sort of like a crunch base with competitive information and it's a very cool tool how do you know if it's accurate or not well i look at our numbers no so i mean but so i think they have a tendency on the revenue to be off but you know employees it has a lot of sort of crowd-sourced information so it gives you a sense of what people think of the ceo what they think of your success what do you think the business is going to do those kinds of things number four how many hours you sleep to get every night uh as i get older it's probably closer to five but when i was uh younger it was probably three to four wow okay and what situation married single you have kids married with two kids so when i'm actually at home which is very almost never i get much more sleep because my wife gets mad if i don't sleep how old are you jim uh 48. all right last question take us back 28 years what do you wish your 20 year old self knew um i guess my 20 year old self probably would need to know that it's important to fail and not be scared of failing i think that's continued i should probably know that now you know focus on the fact that you can keep pushing and it's okay if you fail or lose your job there you guys have it it's okay to fail or lose your job go for it from jimmy sort of last company to cox for about 350 million bucks had only about 30 million bucks raised in that company so a great big financial win for everybody him and his business partner who are great friends they've been doing it for many many years then figure out how to spin this company new company out of cox which really helps internal communications across mega employees and big employee teams they have a about 20 of the global 200 using their platform with contract values you know on the low end in the hundreds of grands and all the way up to millions of dollars per year depending on the size and the growth of the team they raised 68 million bucks team of 200 based out there in san francisco jim thank you for taking us to the top sure thank you if you enjoyed gym today go back and listen to brendan yesterday no pun intended but brendan's company has sold over three million dollars worth of athletic old gear so used athletic gear it's an interesting marketplace trying to find out how we did it